EBay buying Chicago-based Braintree

September 26, 2013|By Samantha Bomkamp | Tribune staff reporter

Offices of Braintree in Chicago in 2012. (Zbigniew Bzdak/Chicago Tribune)

Chicago-based mobile payments processor Braintree is getting scooped up by eBay's PayPal for about $800 million in cash, a deal that highlights the growing appetite for purchases made on smartphones and tablets.

The acquisition is expected to swiftly accelerate the fast-growing Chicago company's expansion. Braintree, which is only six years old, serves companies in 40 countries and is the engine behind smartphone and tablet payments for customers like OpenTable, Airbnb and Uber.

PayPal already has a sizeable investment in mobile payments and expects to process $20 billion in mobile payments this year.

Braintree, which charges a 2.9 percent commission and a 30-cent transaction fee, projects $12 billion in payments this year -- about a third of that mobile.

That's more than triple the business they did just two years ago. Its acquisition of payment application Venmo last year further cemented its dominance in the growing market.

Braintree has raised a total of about $70 million in funding from investors, aiding its rapid growth. It will continue to operate as a separate company after the deal closes, which is expected later this year.

"It was extremely important to us that that we continue to build out our vision of the future," CEO Bill Ready said in an interview.

Braintree was founded in 2007 by University of Chicago Booth School of Business graduate Bryan Johnson after winning Booth’s new venture challenge, which helps entrepreneurial students start businesses. Ready joined Braintree in 2011 and is a tech industry alum and a former strategy consultant at Chicago’s McKinsey & Co.

Braintree's headquarters are in the West Loop, but it also opened a small office in Facebook’s hometown of Menlo Park, Calif. last summer to be closer to customers in Silicon Valley and the Bay Area. Braintree currently has about 200 employees.

PayPal also has Chicago ties. The online payments pioneer was co-founded in Silicon Valley in 1998 by Max Levchin, a graduate of the University of Illinois' computer science program. Many of the company's founders and early employees were fellow U. of I. alumni that have gone on to start other tech firms such as YouTube and Yelp.

Contrary to published reports saying Braintree was seeking a buyer at a $1 billion price tag, Ready said the company “didn’t embark on a path to sell.”

"We never shopped ourselves. We had a lot of people knock on our door," he said. "And we turned a lot of people away."

Ready said the deal with PayPal made sense because the pair shared the same vision on how to grow in the mobile payments industry, which is projected to grow by three fold during the next four years.

"We are in the top of the first inning in terms of mobile payments," Ready said.

Ready also reaffirmed the company’s commitment to remaining in Chicago, which has a growing presence as a base for both established tech companies and startups.

"We think this is the absolute best place to build what we want to build," Ready said. "So, builders, developers, dreamers: we have a place for you."